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PROSPECTUS
NEW FRONTIER MEDIA, INC.
2,059,180 SHARES OF COMMON STOCK
------------------------
The 2,059,180 shares of common stock are being offered by the selling
stockholders. The common stock currently trades on the NASDAQ SmallCap Market
under the symbol "NOOF". On November 9, 1999, the last sale price of the common
stock as reported on NASDAQ was $4.75 per share.
The common stock may be sold by the selling stockholders directly or
through underwriters, dealers or agents in market transactions or privately
negotiated transactions.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. CONSIDER CAREFULLY THE RISK
FACTORS BEGINNING ON PAGE 5 IN THIS PROSPECTUS.
The date of this prospectus is November 19, 1999
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PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this
prospectus. It is not complete and may not contain all of the information that
is important to you. To understand this offering fully, you should read the
entire prospectus carefully, including the risk factors and financial
statements.
NEW FRONTIER MEDIA, INC.
Offices: 5435 Airport Blvd, Suite 100,
Boulder, Colorado 80301
Telephone number (303) 444-0900
Facsimile number (303) 444-0734
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered by Selling
Stockholders................................. 2,059,180 shares
Common Stock to be Offered by Us............. 0 shares
Common Stock Outstanding Before
Offering (1)............................... 19,697,698 shares
Common Stock Outstanding After Offering...... 21,756,878 shares based on all shares offered
under this prospectus.
Use of Proceeds.............................. All of the shares offered by this prospectus
are being offered by the selling
stockholders. New Frontier Media will not
receive any proceeds from these sales of its
stock.
</TABLE>
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(1) Based on shares outstanding as of November 11, 1999.
RISK FACTORS
This prospectus and the documents incorporated in this prospectus by
reference may contain forward-looking statements within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act. These
forward-looking statements are based on current expectations, estimates and
projections about our industry, management's beliefs and assumptions made by
management. Words such as "anticipates," "expects," "intends," "plans,"
"believes," "seeks," "estimates," variations of such words and similar
expressions are intended to identify such forward-looking statements. These
statements are not guarantees of future performance and are subject to certain
risks, uncertainties and assumptions that are difficult to predict.
Accordingly, actual results may differ materially from those expressed or
forecasted in any such forward-looking statements. Such risks and uncertainties
include those risk factors and such other uncertainties noted in the prospectus
and in the documents incorporated herein by reference. New Frontier assumes no
obligation to update publicly any forward-looking statements, whether as a
result of new information, future events or otherwise.
LIMITS ON OUR ACCESS TO DISTRIBUTION CHANNELS COULD CAUSE US TO LOSE SUBSCRIBER
REVENUES AND ADVERSELY AFFECT OUR OPERATING PERFORMANCE.
Our satellite uplink providers' services are critical to us. If our
satellite uplink providers fail to provide the services contracted for with
them, our satellite programming operations would in all likelihood be suspended,
resulting in a loss of substantial revenues to the Company. If our satellite
uplink providers improperly manage their uplink facilities, we could experience
signal disruptions and other quality problems that, if not immediately
addressed, could cause us to lose subscribers and subscriber revenues.
Our continued access to satellite transponders is critical to us. Our
satellite programming operations require continued access to satellite
transponders to transmit programming to our subscribers. We also
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use satellite transponders to transmit programming to cable operators. Material
limitations to satellite transponder capacity could materially adversely affect
our operating performance. Access to transponders may be restricted or denied
if:
* we or the satellite owner is indicted or otherwise charged as a
defendant in a criminal proceeding;
* the FCC issues an order initiating a proceeding to revoke the satellite
owner's authorization to operate the satellite;
* the satellite owner is ordered by a court or governmental authority to
deny us access to the transponder;
* we are deemed by a governmental authority to have violated any obscenity
law; or
* our satellite transponder provider determines that the content of our
programming is harmful to its name or business.
In addition to the above, the access of our networks to transponders may be
restricted or denied if a governmental authority commences an investigation
concerning the content of the transmissions.
Our ability to convince cable operators to carry our programming is
critical to us. The primary way for us to expand our cable subscriber base is to
convince additional cable operators to carry our programming. We can give no
assurance, however, that our efforts to increase our base of cable subscribers
will be successful.
WE HAVE BEEN SUED BY A PROSPECTIVE INVESTOR SEEKING TO ENFORCE AN ALLEGED
AGREEMENT TO CONVEY A 70% EQUITY INTEREST IN NEW FRONTIER MEDIA AND IF WE DO NOT
PREVAIL IN THIS LAWSUIT WE COULD SUFFER A MATERIAL FINANCIAL LOSS.
In a January 25, 1999 amended complaint in District Court in Boulder,
Colorado, (Case No. 99CV30), J.P. Lipson seeks to enforce an alleged agreement
by New Frontier Media to convey to Lipson a 70% equity interest in New Frontier
Media. Lipson is also seeking $10 million in liquidated damages and/or
unspecified damages. If we do not prevail in this lawsuit, we could suffer a
material financial loss which loss, if any, can not be estimated. We dispute
that there exists a binding and enforceable agreement to transfer any equity
interest in New Frontier Media to Lipson and filed on February 10, 1999 a motion
for partial summary judgement directed to this issue. To date the Court has
neither ruled on nor set our motion for a hearing. We will continue to
vigorously defend against Lipson's claims.
IN THE EVENT OUR SHARES OF COMMON STOCK WERE TO BE DELISTED FROM THE NASDAQ
SMALLCAP MARKET, OUR LIQUIDITY AND CAPITAL RESOURCES WOULD BE MATERIALLY AND
ADVERSELY AFFECTED AS OUR FUTURE ACCESS TO THE CAPITAL MARKETS WOULD BE
SIGNIFICANTLY IMPAIRED.
By letter dated August 20, 1999, New Frontier Media has been informed that
the Nasdaq Listing and Hearing and Review Council has called for review of the
Nasdaq Listing Qualifications Panel's decision of July 7, 1999 to continue the
listing of the shares of New Frontier Media's common stock on the Nasdaq
SmallCap Market, to determine "whether the Panel's decision was appropriate
given that the Panel found that New Frontier Media had twice violated the
shareholder approval requirement and that New Frontier Media had not remedied
the violations."
While New Frontier Media has urged the Council to affirm the Panel's
determination to continue the listing of its shares, there can be no assurance
as to what action the Council will decide to take. In the event New Frontier
Media's shares of common stock were to be delisted from the Nasdaq SmallCap
Market, New Frontier Media's liquidity and capital resources would be materially
and adversely affected as New Frontier Media's future access to the capital
markets would be significantly impaired. In addition, upon any such delisting,
the holder of New Frontier Media's 7% Series C convertible preferred stock would
have the right to require the redemption of its $6 million investment in New
Frontier Media.
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The two transactions at issue involved the issuance and sale of securities
authorized by the Board of Directors at prices less than market value and each
exceeding 20% of the outstanding shares prior to the issuance and sale. The two
transactions were approved by the Board of Directors and did not require
shareholder approval under Colorado law.
At the time of the transactions, in view of the time constraints then
involved, New Frontier Media determined to follow an informal procedure
recommended by special Nasdaq counsel of obtaining documentation from a
relatively few large shareholders that these holders of a majority of its
outstanding shares would have approved the two transactions if their proxies had
been solicited. The Nasdaq staff subsequently objected to the use of this
informal procedure indicating, among other things, that New Frontier Media
should have given prior notice of its use of the procedure to New Frontier
Media's stockholders.
On October 5, 1999, New Frontier Media made a written submission urging the
Council to affirm the Panel's determination to continue the listing of New
Frontier Media's shares. On October 27, 1999, in excess of 90 percent of the
shares represented in person or by proxy at New Frontier Media's Annual Meeting
of Shareholders were voted in favor of the ratification of the two transactions
at issue.
In a further effort to demonstrate New Frontier Media's commitment to
future compliance with applicable Nasdaq listing requirements, New Frontier
Media's Board of Directors has formed a special committee of its independent
directors, called the Nasdaq Compliance Committee. This Committee will review
all future corporate transactions to assure their compliance with Nasdaq listing
requirements. For assistance in this regard, the Committee has retained Harvey
L. Pitt, former General Counsel of the Securities and Exchange Commission, and
now a partner at the law firm of Fried, Frank, Harris, Shriver & Jacobson in
Washington, D.C. In addition, New Frontier Media has resolved to consult with
the staff of the Nasdaq Stock Market, Inc. in the event that New Frontier Media
proposes to act contrary to the advice of the Special Committee's legal counsel
on any of these matters.
IN THE EVENT OUR SHARES OF COMMON STOCK WERE TO BE DELISTED FROM THE NASDAQ
SMALLCAP MARKET, AND OUR SHARES WERE TO BECOME SUBJECT TO THE RULES ON PENNY
STOCKS, THE MARKET LIQUIDITY FOR THE COMPANY'S SECURITIES COULD BE SEVERELY
ADVERSELY AFFECTED.
In the event our shares of common stock were to be delisted from the Nasdaq
SmallCap Market, and our shares were to become subject to the rules on penny
stocks, the market liquidity for the Company's common stock could be severely
adversely affected. There are a number of special disclosures and inquires which
a broker or dealer must make before they can approve a person's account for
transactions in penny stocks. As such, it is more difficult for a company whose
securities are considered to be a penny stock to attract investors and market
interest.
Effective August 11, 1993, the Securities and Exchange Commission adopted
Rule 15g-9, which established the definition of a "penny stock," for purposes
relevant to New Frontier Media, as any equity security that has a market price
of less than $5.00 per share or with an exercise price of less than $5.00 per
share, subject to certain exceptions.
For any transaction involving a penny stock, unless exempt, the rule
requires that a broker or dealer approve a person's account for transactions in
penny stocks; and the broker or dealer receive from the investor a written
agreement to the transaction, setting forth the identity and quantity of the
penny stock to be purchased. In order to approve a person's account for
transactions in penny stocks, the broker or dealer must obtain financial
information and investment experience and objectives of the person; and make a
reasonable determination that the transactions in penny stocks are suitable for
that person and that person has sufficient knowledge and experience in financial
matters to be capable of evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny
stock, a disclosure schedule prepared by the Securities and Exchange Commission
relating to the penny stock market, which, in highlighted form: sets forth the
basis on which the broker or dealer made the suitability determination; and that
the broker or dealer received a signed, written agreement from the investor
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prior to the transaction. Disclosure also has to be made about the risks of
investing in penny stocks in both public offerings and in secondary trading, and
about commissions payable to the broker-dealer. Finally, monthly statements have
to be sent disclosing recent price information for the penny stock held in the
account and information on the limited market in penny stocks.
IF WE ARE UNABLE TO COMPETE EFFECTIVELY WITH OUR PRIMARY COMPETITOR, WHO HAS
SIGNIFICANTLY GREATER RESOURCES THAN US, WE WILL NOT BE ABLE TO INCREASE
SUBSCRIBER REVENUES OR GENERATE PROFITS.
Our ability to increase subscriber revenues and operate profitably, is
directly related to our ability to compete effectively with Playboy, our
principal competitor. Playboy has significantly greater financial, sales,
marketing and other resources to devote to the development, promotion and sale
of its cable programming products, as well as a longer operating history and
broader name recognition, than we do. We compete with Playboy as to the editing
standards of its programming, network performance in terms of subscriber buy
rates and the license fees that we offer to cable and DBS system providers.
IF WE ARE UNABLE TO COMPETE EFFECTIVELY WITH OTHER FORMS OF ADULT AND NON-ADULT
ENTERTAINMENT, WE WILL ALSO NOT BE ABLE TO INCREASE SUBSCRIBER REVENUES OR
GENERATE PROFITS.
Our ability to increase subscriber revenues and operate profitably, is also
related to our ability to compete effectively with other forms of adult and
non-adult entertainment. We face competition in the adult entertainment industry
from other providers of adult programming, adult video rentals and sales,
newspapers and magazines aimed at adult consumers, adult oriented telephone chat
lines, and adult oriented Internet services. To a lesser extent, we also face
general competition from other forms of non-adult entertainment, including
sporting and cultural events, other television networks, feature films and other
programming.
IF WE ARE NOT ABLE TO RETAIN OUR KEY EXECUTIVES IT WILL BE MORE DIFFICULT FOR US
TO MANAGE OUR OPERATIONS AND OUR OPERATING PERFORMANCE COULD BE ADVERSELY
AFFECTED.
As a small company with approximately 150 employees, our success depends
upon the contributions of our executive officers and our other key technical
personnel. The loss of the services of any of our executive officers or other
key personnel could have a significant adverse effect on our business and
operating results. We cannot assure that New Frontier Media will be successful
in attracting and retaining these personnel. It may also be more difficult for
us to attract and recruit new personnel due to the adult nature of our business.
OUR INABILITY TO IDENTIFY, FUND THE INVESTMENT IN, AND COMMERCIALLY EXPLOIT NEW
TECHNOLOGY COULD HAVE AN ADVERSE IMPACT ON OUR FINANCIAL CONDITION.
We are engaged in a business that has experienced tremendous technological
change over the past two years. As a result, we face all the risks inherent in
businesses that are subject to rapid technological advancement, such as the
possibility that a technology that we have invested in may become obsolete. In
that event, we may be required to invest in new technology. Our inability to
identify, fund the investment in, and commercially exploit such new technology
could have an adverse impact on our financial condition. Our ability to
implement our business plan and to achieve the results projected by management
will be dependent upon management's ability to predict technological advances
and implement strategies to take advantage of such changes.
GOVERNMENT REGULATION OF CABLE SYSTEM OPERATORS COULD MAKE IT MORE DIFFICULT FOR
THEM TO BROADCAST OUR PROGRAMMING AND ADVERSELY AFFECT OUR OPERATING
PERFORMANCE.
Cable system operators could become subject to new governmental regulations
which could further restrict their ability to broadcast our programming. If new
regulations make it more difficult for cable operators to broadcast our
programming our operating performance would be adversely affected. It is not
possible for us to predict what new governmental regulations we may be subject
to in the future.
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Cable system operators have been subject to Section 505 of the
Telecommunications Act of 1996 since May 18, 1997. We began offering adult
programming for cable system operators in February 1998. We have never had the
opportunity, or prior history, of selling our programming under any other
regulatory structure. It is difficult to estimate what effect this Act has had
on our potential business and potential subscribers.
Section 505 of the Telecommunications Act effectively requires each cable
system that offers adult programming either to:
* install additional blocking technology in each household to prevent any
momentary fragments of our content from accidentally becoming available to
non-subscribing cable customers or
* restrict the period during which adult programming is transmitted to the
hours between 10:00 p.m. and 6:00 a.m.
Although a United States District Court has unanimously declared this law
unconstitutional and blocked its implementation, the decision has been appealed
and accepted for review by the U.S. Supreme Court. It has been our experience
that most cable system operators are continuing to restrict the broadcast of
adult programming to the hours of 10:00 p.m. to 6:00 a.m. and are unwilling to
rely on the District Court's decision until the U.S. Supreme Court issues its
ruling on the constitutionality of Section 505 of the Act.
NEGATIVE PUBLICITY, LAWSUITS OR BOYCOTTS BY OPPONENTS OF ADULT CONTENT COULD
ADVERSELY AFFECT OUR OPERATING PERFORMANCE AND DISCOURAGE INVESTORS FROM
INVESTING IN OUR PUBLICLY TRADED SECURITIES.
We could become a target of negative publicity, lawsuits or boycotts by one
or more advocacy groups who oppose the distribution of "adult entertainment."
These groups have mounted negative publicity campaigns, filed lawsuits and
encouraged boycotts against companies whose businesses involve adult
entertainment. The costs of defending against any such negative publicity,
lawsuits or boycotts could be significant, could hurt our finances and could
discourage investors from investing in our publicly traded securities. To date,
we have not been a target of any of these advocacy groups. As a leading provider
of adult entertainment, we can not assure you that we may not become a target in
the future.
BECAUSE WE ARE INVOLVED IN THE ADULT PROGRAMMING BUSINESS, IT MAY BE MORE
DIFFICULT FOR US TO RAISE MONEY OR ATTRACT MARKET SUPPORT FOR OUR STOCK.
Some investors, investment banking entities, market makers, lenders and
others in the investment community may decide not to provide financing to us, or
to participate in our public market or other activities due to the nature of our
business, which, in turn, may hurt the value of our stock, and our ability to
attract market support.
BECAUSE IT MAY BE DIFFICULT TO EFFECT A CHANGE IN CONTROL OF NEW FRONTIER MEDIA
WITHOUT CURRENT MANAGEMENT'S CONSENT, A POTENTIAL SUITOR WHO OTHERWISE MIGHT BE
WILLING TO PAY A PREMIUM FOR ACQUIRING OUR COMPANY MAY DECIDE NOT TO ATTEMPT AN
ACQUISITION OF NEW FRONTIER MEDIA.
Issuance of a poison-pill or a large block of preferred stock with voting
rights could have the effect of delaying, deferring or preventing a change in
control of New Frontier Media. Potential suitors who otherwise might be willing
to pay a premium to acquire New Frontier Media may decide not to try to acquire
us because it may be difficult to effect a change in control of New Frontier
Media without current management's consent. New Frontier Media's board of
directors has the authority to issue up to 5,000,000 shares of preferred stock
and to determine the price, rights, preferences, privileges and restrictions,
including voting rights, of such stock without further shareholder approval. The
rights of the holders of common stock will be subjected to, and may also be
adversely affected by, the rights of the holders of any preferred stock that may
be issued in the future.
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FUTURE SALES OF COMMON STOCK MAY CAUSE THE MARKET PRICE OF THE COMMON STOCK TO
DROP.
Future sales of shares of common stock by New Frontier Media and/or its
stockholders could cause the market price of the common stock to drop. There are
currently 11,877,433 restricted shares and 7,802,265 shares of common stock
which are freely tradable or eligible to have the restrictive legend removed
pursuant to Rule 144(k) promulgated under the Securities Act. Of the
restricted shares, 1,988,800 of such shares are currently eligible for resale
under Rule 144. Sales of substantial amounts of common stock in the public
market, or the perception that such sales may occur, could have a significant
adverse effect on the market price of the common stock.
THE YEAR 2000 PROBLEM COULD CAUSE US TO SUFFER BUSINESS INTERRUPTIONS, OR
SHUTDOWN, REPUTATIONAL HARM OR LEGAL LIABILITY, AND AS A RESULT, MATERIAL
FINANCIAL LOSS.
We recognize that we, like all other businesses, are at risk if key
suppliers in utilities, communications, transportation, banking and government
are not ready for the year 2000. We also are at risk if the cable or DBS
operators with whom we do business are not ready for the year 2000. It is also
possible that our computer software applications, internal accounting, customer
billing and other business systems, working either alone or in conjunction with
those of third parties who do business with us, will not accept input of, store,
manipulate and output dates in the year 2000 or after without error. If any of
this were to happen, we may suffer business interruptions or shutdown,
reputational harm or legal liability and, as a result, material financial loss.
SHAREHOLDERS MAY NOT BE ABLE TO RE-SELL THEIR STOCK OR MAY HAVE TO SELL AT
PRICES SUBSTANTIALLY LOWER THAN THE PRICE THEY PAID FOR IT.
The trading price for the common stock has been highly volatile and could
continue to be subject to significant fluctuations in response to variations in
our quarterly operating results, general conditions in the adult entertainment
industry or the general economy, and other factors. In addition, the stock
market is subject to price and volume fluctuations affecting the market price
for public companies generally, or within broad industry groups, which
fluctuations may be unrelated to the operating results or other circumstances of
a particular company. Such fluctuations may adversely affect the liquidity of
the common stock, as well as the price that holders may achieve for their shares
upon any future sale.
INDEMNIFICATION
Our Bylaws require us, to the fullest extent permitted or required by
Colorado law, to:
* indemnify our directors against any and all liabilities and
* advance any and all reasonable expenses incurred in any proceeding to
which any such director is a party or in which such director is deposed or
called to testify as a witness because he or she is or was a director of New
Frontier Media.
Generally, Colorado statutory law permits indemnification of a director
upon a determination that he or she acted in good faith and in a manner he or
she reasonably believed to be in, or not opposed to, the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The right to
indemnification granted in our Bylaws is not exclusive of any other rights to
indemnification against liabilities or the advancement of expenses which a
director may be entitled to under any written agreement, Board resolution, vote
of stockholders, Colorado law or otherwise.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant under the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
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WHERE YOU CAN GET MORE INFORMATION
At your request, we will provide you, without charge, a copy of any
exhibits to our registration statement incorporated by reference in this
prospectus. If you want more information, write or call us at:
New Frontier Media, Inc.
5435 Airport Blvd, Suite 100
Boulder, Colorado 80301
Telephone number: (303) 444-0900
Toll Free number: 1-888-875-0632
Facsimile number: (303) 444-0734
Our fiscal year ends on March 31. We furnish our shareholders annual
reports containing audited financial statements and other appropriate reports.
In addition, we are a reporting company and file annual, quarterly and current
reports, proxy statements and other information with the SEC. You may read and
copy any reports, statements or other information we file at the SEC's public
reference room in Washington D.C. You can request copies of these documents,
upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the public reference
rooms. Our SEC filings are also available to the public on the SEC Internet site
at http:\\www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to these documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We incorporate
by reference the documents listed below, which we have already filed with the
SEC, and any future filings we make with the SEC under Sections 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act of 1934 until the selling stockholders
sell all of the securities offered by this prospectus.
New Frontier Sec Filings (File No. 0-23697)
* Annual Report on Form 10-KSB/A for the year ended March 31, 1999
* All other reports and other documents filed by us pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 since March 31, 1999
* Our registration statement on Form 8-A12G filed on January 30, 1998
registering the common stock under Section 12(g) of the Securities Exchange
Act of 1934
This prospectus is part of a registration statement we filed with the SEC.
You should rely only on the information incorporated by reference or
provided in this prospectus. We have not authorized anyone to provide you with
different information. We are not making an offer of these securities in any
state where the offer is not permitted. You should not assume that the
information in this prospectus or the documents incorporated by reference is
accurate as of any date other than the date on the front of this prospectus or
those documents.
REGISTRATION RIGHTS
In connection with our private placement of 600 shares of 7% Series C
convertible preferred stock, we are obligated to use our best efforts to cause
this registration statement to become effective by February 11, 2000. We are
further obligated to register and qualify the registerable shares under such
state securities laws as the selling stockholders may reasonably request. We
will bear the reasonable expenses of the registration and qualification of the
shares under the Securities Act and state securities laws other than any
underwriting discounts and commissions and the expenses of counsel for the
selling stockholders.
If the registration statement is not effective by April 11, 2000, then JNC
Opportunity Fund Ltd. has the right to require New Frontier Media to redeem all
or a portion of the preferred stock then held by them.
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USE OF PROCEEDS FROM SALE OF COMMON STOCK
Proceeds from the sale of the shares of common stock being registered
hereby will be received directly by the selling stockholders. Accordingly, we
will not receive any proceeds from the sale of the shares.
SELLING STOCKHOLDERS
The selling stockholders whose shares of common stock are being registered
hereunder are: JNC Opportunity Fund Ltd., Doug Moreland, Columbine Financial
Solutions, Inc., Kent Krausman, Robert Seefeld and Michael Seeley.
No selling stockholder has any affiliation with New Frontier Media or its
officers, directors, promoters or principal shareholders.
JNC Opportunity Fund Ltd. purchased an aggregate of 600 shares of our 7%
Series C Convertible Preferred Stock and a warrant to purchase 360,000 shares of
our common stock for an aggregate purchase price of $6 million in a private
placement transaction which closed effective September 30, 1999. The preferred
stock may be converted into shares of our common stock. Holders of the preferred
stock and the warrant are prohibited from converting or exercising into and
acquiring shares of our common stock to the extent that such conversion or
exercise would result in such holder, together with any affiliate thereof,
beneficially owning in excess of 4.999% of the outstanding shares of our common
stock following such conversion or exercise. This restriction may be waived by
the holder as to itself on not less than 61 days' notice to us.
Since the number of shares of our common stock that will be issuable upon
conversion of the preferred stock will, on April 11, 2000 and each three month
anniversary thereof, change based upon fluctuations of the market price of
shares of our common stock prior to a conversion, the actual number of shares of
our common stock that will be issuable upon conversion of the preferred stock
cannot be determined at this time. Because of this fluctuating characteristic,
we have agreed to register a number of shares of our common stock that exceeds
the number of our shares of common stock currently beneficially owned by JNC.
The number of shares of our common stock listed in the table below as currently
being beneficially owned by JNC includes the shares of our common stock that are
issuable to it, subject to the 4.999% limitation, upon conversion of the
preferred stock and exercise of the warrant. However, the 4.999% limitation
would not prevent JNC from acquiring and selling in excess of 4.999% of shares
of our common stock through a series of conversions and sales under the
preferred stock and exercises and sales under the warrant while never
beneficially owning more than 4.999% at any one time.
New Frontier has agreed to register the public offering of the selling
stockholders' shares of common stock under the Securities Act and to pay all
expenses in connection with such registration, other than brokerage commissions
and discounts in connection with the sale of the common stock and the expenses
of counsel.
The following table sets forth the names of the selling stockholders, the
number of shares of common stock owned beneficially by each of the selling
stockholders as of November 12, 1999, the number of shares which may be offered
for resale pursuant to this prospectus and the number of shares of common stock
owned beneficially by each of the selling stockholders after the offering.
The information included below is based upon information provided by the
selling stockholders. Because the selling stockholders may offer all, some or
none of their common stock, no definitive estimate as to the number of shares
that will be held by the selling stockholders after such offering can be
provided and the following table has been prepared on the assumption that all
shares of common stock offered under this prospectus will be sold.
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<TABLE>
<CAPTION>
SHARES OF SHARES OF
COMMON STOCK SHARES OF COMMON STOCK
BENEFICIALLY COMMON BENEFICIALLY
OWNED PRIOR TO STOCK BEING OWNED AFTER
NAME OF SELLING STOCKHOLDER OFFERING(1) OFFERED OFFERING(2)
- ---------------------------------------------- -------------- -------------- --------------
<S> <C> <C> <C>
JNC Opportunity Fund Ltd...................... 1,036,502 1,694,180 0
Doug Moreland................................. 100,000 100,000 0
Columbine Financial........................... 100,000 100,000 0
Kent Krausman................................. 75,000 75,000 0
Robert Seefeld................................ 50,000 50,000 0
Michael Seeley................................ 40,000 40,000 0
</TABLE>
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(1) Beneficial ownership is calculated in accordance with Rule 13d-3(d) under
the Exchange Act except with respect to JNC Opportunity Fund's beneficial
ownership, which is subject to the 4.999% limitation described above.
(2) Assumes the sale of all shares offered by this prospectus.
PLAN OF DISTRIBUTION
The selling stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The selling stockholders may use any one or more of the
following methods when selling shares:
* ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
* block trades in which the broker-dealer will attempt to sell the shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction;
* purchases by a broker-dealer as principal and resale by the broker-dealer
for its account;
* an exchange distribution in accordance with the rules of the applicable
exchange;
* privately negotiated transactions;
* short sales, except as described below;
* broker-dealers may agree with the selling stockholders to sell a specified
number of such shares at a stipulated price per share;
* a combination of any such methods of sale; and
* any other method permitted pursuant to applicable law.
The selling stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
The selling stockholders may also engage in short sales against the box,
puts and calls and other transactions in securities of New Frontier Media or
derivatives of New Frontier Media securities and may sell or deliver shares in
connection with these trades; provided that the holders of the 7% Series C
convertible preferred stock may not enter into any "Short Sales" during the
applicable conversion price reset periods for the preferred stock. The selling
stockholders may pledge their shares to their brokers under the margin
provisions of customer agreements. If a selling stockholder defaults on a margin
loan, the broker may, from time to time, offer and sell the pledged shares.
Brokers-dealers engaged by the selling stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
The selling stockholders and any broker-dealers or agents that are involved
in selling the shares may be deemed to be "underwriters" within the meaning of
the Securities Act in connection with such
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sales. In such event, any commissions received by such broker-dealers or agents
and any profit on the resale of the shares purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.
New Frontier Media is required to pay all fees and expenses incident to the
registration of the shares, including fees and disbursements of counsel to the
selling stockholders. New Frontier Media has agreed to indemnify the selling
stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
DIVIDEND POLICY
We have not paid any cash or other dividends on our common stock since our
inception and do not anticipate paying any such dividends in the foreseeable
future. We intend to retain any earnings for use in our operations and to
finance the expansion of its business.
LEGAL MATTERS
The legality of the Shares offered hereby has been passed upon for us by
Thorburn, Sakol & Throne of Denver, Colorado.
EXPERTS
The financial statements of New Frontier Media as of March 31, 1999 and
1998 and for the years ended March 31, 1999 and 1998, incorporated by reference
in this prospectus from the Annual Report, have been incorporated herein in
reliance on the report of Spicer, Jeffries & Co., independent certified public
accountants, given on the authority of said firm as experts in accounting and
auditing.
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TABLE OF CONTENTS
PAGE
----
Prospectus Summary......................................... 3
The Offering............................................... 3
Risk Factors............................................... 3
Indemnification............................................ 8
Where You Can Get More Information......................... 9
Registration Rights........................................ 9
Use of Proceeds from Sale of Common Stock.................. 10
Selling Stockholders....................................... 10
Plan of Distribution....................................... 11
Dividend Policy............................................ 12
Legal Matters.............................................. 12
Experts.................................................... 12
